October 4, 2022
Norway's introduction of tax proposal rouses displeasure from salmon companies
Norwegian salmon-farming firms are rethinking planned investments following the introduction of a proposal by Norway's government that would increase the tax rate they face by 40%.
On September 28, the government proposed a new resource rent tax on aquaculture operators, with effect from January 1, 2023, which will affect producers of salmon, trout and rainbow trout.
Kverva, Norway-based SalMar and Lovund, Norway-based Nova Sea have already announced pullbacks from planned infrastructure upgrades. Mowi, Lerøy Seafood, and Grieg Seafood are among companies that have released statements announcing a review of how the proposed tax could affect their operations and future investments.
SalMar "has chosen to use the opportunity to terminate the purchase" of 1,223 tonnes of maximum allowed biomass it made earlier in 2022 as part of a relative share capacity adjustment available through Norway's "traffic-light" permitting system. The price of the acquisitions was kr244.6 million (US$22.5 million).
"This is due to the resource rent tax the government has now announced. The proposals involve, among other things, that the state acquires 40% of all cash flows in the company and that the other owners' share is correspondingly reduced," SalMar said in a statement. "This is expressed by the total tax for aquaculture companies in Norway increasing from 22% to 62%. If the proposals were to be adopted, there would be major consequences for the company's investment decisions and capital allocation going forward.
"This has created a situation which means that the company does not find it justifiable to pay the aforementioned remuneration. The government's surprising proposal, without waiting for the recommendation from the government-appointed tax committee, has also led to an unpredictability on the part of the authorities, which reinforces the need for a closer evaluation of the company's future investment strategies."
SalMar chief executive officer Linda L. Aase warned the tax, if enacted, will have a crippling impact on Norway's salmon-farming industry.
"This is a tax on aquaculture companies creating value and workplaces on the coast of Norway," Aase said. "A tax like this will have significant negative ripple effects for all adjacent industries of the aquaculture industry and the jobs it creates. SalMar will revert with additional information on the consequences of such taxation for our group operations once further details of the new tax have been clarified."
Similarly, Nova Sea – which counts Mowi as a minority owner – has put its previously announced plan to build a new hatchery and slaughterhouse on hold following the introduction of the tax proposal.
"The way the proposal from the Ministry of Finance is designed, our financial leeway created from marine production will be taxed at 62%," Nova Sea CEO Tom Eirik Aasjord said in a statement. "This in turn will significantly weaken our ability to handle new investments. In particular, this will affect investments on land, as tax deductions will only apply to investments in marine production itself. It is not in marine production that we have the biggest investments going forward.
"Our framework conditions for creating growth and new jobs out in the rural areas were completely turned upside down within minutes."
Nova Sea chairman Aino Olaisen said the tax, combined with a steep increase in business costs, threatens the stability of the industry.
"Over the past two years, the farming industry has had an explosive increase in its production costs. Our customers in Europe and in the rest of the world are in the middle of an extreme situation with high inflation, where future purchasing power is threatened," Olaisen said. "In parallel with this, the Ministry of Finance is introducing a production tax from 2021, making major tightening of wealth taxation and introducing a basic rate of 40%, which gives a marginal tax of 62%.
"The sum of all this results in an uncertainty that is too great for Nova Sea to proceed with the growth plans for the group as the situation currently stands."
Lerøy Seafood, Grieg Seafood, and Mowi each issued statements condemning the tax proposal. Lerøy called the plan "undoubtedly hostile to the industry" and Grieg said it had paused all new investments until it has a clearer picture of its future financial picture.